Saudi Aramco Gives Up Plans to Partner With Petronas for MYR89 Bln Petrochem Project in Malaysia

By Summer Said and Yantoultra Ngui

CAIRO–Saudi Arabian Oil Co., or Saudi Aramco, has given up plans to partner Malaysia’s national oil company for an up to 89 billion ringgit ($20.1 billion) refining and petrochemicals project in the southern state of Johor, according to three people familiar with the matter.

The world’s largest oil firm concluded that the project led by Petroliam Nasional Bhd., or Petronas, wouldn’t generate sufficient returns after conducting a feasibility study, according to the people.

The two companies were in talks to create a joint venture partnership to build a refinery with capacity to process 300,000 barrels of oil a day, alongside a petrochemical complex with a combined annual chemical output of 7.7 million metric tons, the people said.

Petronas previously estimated the proposed complex, located at a fishing town in Johor, just opposite Singapore, would cost some 53 billion ringgit to build. Related facilities ranging from raw-water supply to a plant to turn liquefied natural gas back into gas would cost another 36 billion ringgit.

A Petronas spokesman said, “Petronas does not respond to speculations and will not be offering any comment on this.”

A Saudi Aramco spokesman said, “Saudi Aramco is continually evaluating new business opportunities but does not comment on rumor or speculation.”

Saudi Aramco’s decision not to take part in the project is a blow to Petronas. Malaysia’s only Fortune 500 company is recovering from low oil prices over the past two years and was looking for new ways to boost revenue after embarking on a sweeping cost-reduction program. It announced in January last year that it would slash spending by as much as 50 billion ringgit over the next four years after being hit by lower oil prices. Petronas also said last year it would cut 1,000 jobs.

It reported an after-tax profit of 6.1 billion ringgit in the third quarter ended September, compared with a net profit of 1.6 billion the previous quarter.

The company is scheduled to announce its fourth-quarter results next month.

Write to Summer Said at summer.said@wsj.com and Yantoultra Ngui at yantoultra.ngui@wsj.com

Breaking the story

Summer Said and Yantoultra Ngui were first to report that Saudi Arabian Oil Co., or Saudi Aramco, has axed plans to create a joint venture with Malaysia’s national oil company, Petronas. According to sources, a feasibility study has indicated the 89 billion ringgit ($20.1 billion) project would not generate sufficient returns.

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